PHYSICIAN HEALTH CORPORATION
000 Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
December 31, 1997
X. Xxxxxxx Xxxxxxx, M.D.
Metropolitan Plastic and
Reconstructive Surgery, Ltd.
000 Xxxxx Xxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Re: Physician Health Corporation ("PHC").
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Dear Xx. Xxxxxxx:
Reference is made to that certain Asset Purchase Agreement ("Purchase
Agreement"), dated as of October 24, 1996, by and among PHC, PHC-St. Louis
Acquisition Subsidiary I, Inc. ("PHC-Sub") and Metropolitan Plastic and
Reconstructive Surgery, Ltd. ("MPRS"), that certain Practice Management
Agreement (the "Management Agreement"), dated as of November 26, 1997, by and
among PHC, PHC-Sub and MPRS and that certain General Undertakings Agreement (the
"Undertakings Agreement"), dated as of October 25, 1996, by and among PHC, PHC-
Sub, MPRS and X. Xxxxxxx Xxxxxxx, M.D. ("Xxxxxxx"), as amended by the Amendment
to the Undertakings Agreement (the "Amendment"), dated November 11, 1997, by and
among PHC, PHC-Sub, MPRS and Xxxxxxx (collectively, the Purchase Agreement,
Management Agreement, Undertaking Agreement and Amendment are the "MPRS
Agreements"). Capitalized terms not otherwise defined in this agreement (this
"Letter Agreement") shall have the meanings assigned to such terms in the MPRS
Agreements.
In consideration of good and valuable consideration, the receipt and
sufficiency of which is acknowledged by the parties, PHC, PHC-Sub, MPRS and
Xxxxxxx agree that as of the close of business on December 31, 1997:
1) The Management Agreement is terminated effective on the earlier to
occur of (i) June 30, 1998 and (ii) the date that Xxxxxxx ceases to
practice medicine through MPRS. The parties acknowledge that
notwithstanding anything to the contrary contained herein or in the
Employment Agreement (hereafter defined) Xxxxxxx may practice medicine
through MPRS up to one full day a week through June 30, 1998 in order
that Xxxxxxx may successfully transition his surgical practice. From
and after the date of this Letter Agreement, Xxxxxxx shall not
directly or indirectly sell his interest in MPRS to any person or
entity not controlled or managed by PHC or PHC-Sub. Notwithstanding
anything to the contrary in this Letter Agreement, (i) from and after
the date of this Letter Agreement, neither Xxxxxxx nor MPRS shall
be responsible for payment of a management fee under the Management
Agreement, (ii) Xxxxxxx and MPRS shall be responsible for the direct
costs of the practice of medicine by Xxxxxxx from and after the date
of this Letter Agreement, (iii) Xxxxxxx and MPRS shall be entitled to
fees derived from the practice of medicine by Xxxxxxx from and after
the date of this Letter Agreement and (iv) neither PHC nor PHC-Sub
shall be responsible for any negative difference between fees derived
from and direct costs associated with the practice of medicine by
Xxxxxxx from and after the date of this Letter Agreement.
2) Each of PHC, PHC-Sub and MPRS, their respective predecessors,
successors, assigns, agents, and legal representatives forever release
and discharge each other, their employees, affiliates, successors,
assigns, heirs, agents, and legal representatives of and from any and
all claims, demands, controversies, debts, actions, or causes of
action, of whatever nature or character, whether now known or unknown,
related to or in any way arising out of the Management Agreement or
the relationships or transactions giving rise to such. Nothing in
this paragraph releases PHC, PHC-Sub and MPRS from their obligations
under this Letter Agreement;
3) MPRS hereby forgives the PHC $500,000, 5% Convertible Subordinated
Promissory Note Due 1999, dated November 26, 1996, executed by PHC for
the benefit of MPRS (the "Note") and will have no further rights in
connection with the Note, including the right to convert the Note into
shares of PHC Common Stock;
4) PHC hereby forgives any and all loans (including interest accrued
thereon) made to Xxxxxxx pursuant to Section 9 of the Undertakings
Agreement; [CONFIRM]
5) PHC will grant to Xxxxxxx non-qualified stock options (the "Options")
to purchase up to 125,000 shares of PHC Common Stock at an exercise
price of $4.00 per share, with 1/3 of such Options vesting each year
after the date of the grant and with such other terms as be shall set
forth in a non-qualified stock option agreement. In the event that
Xxxxxxx'x employment is terminated without cause prior to the complete
vesting of such options, such options will fully vest on the date of
termination of employment;
6) The right granted to Xxxxxxx, as set forth in the PHC Written Consent
of Directors, dated as of June 16, 1997 (the "Director Consent") and
relating to PHC's grant of options to Xxxxxxx to purchase up to
300,000 shares of Common Stock pursuant to the Undertakings Agreement,
to elect to receive a cash payment in event the Company is sold
(through a merger, sale of assets or otherwise) at an effective price
of less than $4.00 per share of Common Stock, equal to the product of:
(i) $0.80 multiplied by (ii) the number of options remaining
unexercised at the time of such change of control multiplied by (iii)
the effective price per share of Common Stock received by the holders
of Common Stock in the sale, provided that Xxxxxxx remains an employee
of the Company and surrenders that portion of such options that remain
unexercised, is hereby terminated;
7) PHC acknowledges that as of the date of this Letter Agreement, PHC
will have responsibility for the lease obligations (the "Lease
Obligations") related to 000 Xxxxx Xxx Xxxxxx Xxxx, Xxxxx 000, Xx.
Xxxxx, Xxxxxxxx 00000. MPRS and Xxxxxxx will use their best efforts to
help PHC and PHC-Sub obtain tenants who will assume Lease Obligations;
8) Concurrently with the execution of this agreement, Xxxxxxx and PHC
shall execute an Employment Agreement in the form attached hereto as
Exhibit A;
9) PHC's obligation to pay Xxxxxxx'x quarterly draw as set forth in
paragraph 5 of the Undertaking Agreement is terminated;
10) PHC hereby forgives Xxxxxxx for all quarterly draw payments which have
not been repaid and remain outstanding and forever releases and
discharges Xxxxxxx and MPRS, its employees, affiliates, successors,
assigns, heirs, agents, and legal representatives of and from any and
all claims, demands, controversies, debts, actions, or causes of
action, of whatever nature or character, whether known or unknown,
related to or in any way arising out of any quarterly draw payment
which has not been repaid to PHC as required by paragraph 5 of the
Undertaking Agreement;
11) Section 7 of the Undertakings Agreement is hereby terminated;
12) From and after January 1, 1997, PHC-Sub shall reimburse Xxxxxxx and
MPRS for malpractice insurance premium costs, including tail
insurance, at levels consistent with those previously maintained by
Xxxxxxx and MPRS;
13) From and after January 1, 1997, PHC shall for so long as Xxxxxxx
remains employed by PHC reimburse Xxxxxxx for up to $5,000 in
documented continuing medical education expense;
14) PHC confirms its agreement to reimburse Xxxxxxx for 12 months rental
expense for an apartment in Atlanta (start date August 15, 1997) and
to reimburse Xxxxxxx for reasonable and documented moving expenses
related to the relocation of his personal residence to Atlanta,
Georgia from St. Louis, Missouri; and
15) PHC will reimburse Xxxxxxx for up to $5,000 in documented legal
expenses incurred by him in connection with the negotiation and
documentation of this Letter Agreement and the other agreements
contemplated hereby.
16) In recognition of Xxxxxxx'x substantial role in PHC's 1997 acquisition
program as a whole, PHC will pay Xxxxxxx the $600,000 referenced in
Section 2 of the Undertakings Agreement.
This Letter Agreement shall be governed and construed under the laws of the
State of Georgia except to the extent the MPRS Agreements and the Note provide
otherwise. If any term, provision, covenant, or condition of this Letter
Agreement is held to be invalid or unenforceable by a court of competent
jurisdiction, it is to that extent deemed omitted and the remainder of this
Letter Agreement shall continue in full force and effect. Furthermore, in lieu
of each illegal, invalid or unenforceable provision of this Letter Agreement,
there shall be added automatically as part of this
Letter Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
This Letter Agreement may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one Letter Agreement.
Please execute this Letter Agreement in the space provided below to
evidence that the above is in accordance with our understanding.
Very truly yours,
Physician Health Corporation
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
President
AGREED AND ACCEPTED:
/s/ X. Xxxxxxx Xxxxxxx
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X. Xxxxxxx Xxxxxxx, M.D.
Metropolitan Plastic and Reconstructive Surgery, Ltd.
By: /s/ X. Xxxxxxx Xxxxxxx
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Printed Name: X. Xxxxxxx Xxxxxxx
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Title: President
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PHC-St. Louis Acquisitions Subsidiary I
By: /s/ X. Xxxxxxx Xxxxxxx
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Printed Name: X. Xxxxxxx Xxxxxxx
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Title: President
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